Petrobras Sees Bump in Q1 Core Earnings

Core earnings at Brazil's Petrobras surged in the first quarter on the back of higher revenues, the national oil firm reported on May 14, but it swung to a net loss due to impairments.

Adjusted Ebitda reached reais 37.5bn ($8.58bn) in the first quarter, up 36.4% year on year (yr/yr) in reais terms but up only 17.6% in US dollar terms, owing to the reais' devaluation. Revenues rose by 6.5% to reais 75.5bn, but in dollar terms fell by 8.8% to $17.1bn. Petrobras sold its oil on average for $50.3/b during the three-month period, versus $63.2 a year ago.

Petrobras booked reais 65.3bn in impairments and write-downs, causing it to report a net loss of reais 48.5bn. This marked a reversal from a reais 8.15bn income a year earlier. Impairments included reais 57.6bn at the company's deepwater assets and reais 6.6bn at its shallow-water fields.

Like other producers, Petrobras was stung by the steep fall in oil prices in March, caused by weakening demand as a result of the Covid-19 pandemic and a conflict over market share between Saudi Arabia. But it said the full effect of the pandemic would be felt in coming quarters.

Petrobras warned that it was revising all its oil and gas exploration and production projects to ensure they were feasible, after slashing its long-term forecast for Brent to $50/b from $65. Its expects the benchmark to average $25/b in 2020 and rise $5 each year until it reaches $50 in 2025. 

"The company expects a lower level of demand in the long term, taking into account... structural change in the world economy, with permanent effects arising from this economic shock, including changes observed in consumer habits," Petrobras said in a statement.

Hydrocarbon production was up 13.3% at 2.61mn boe/d, on the back of growth at pre-salt oilfields off the coast of Rio de Janeiro and Sao Paulo. Extraction of oil and natural gas liquids in Brazil grew by 17.7% to 2.32mn boe/d, while domestic gas output increased by 9.6% to 536,000 boe/d. Petrobras' international production dropped 30.8%, landing at 54,000 boe/d.

While ramping up production at new offshore finds, Petrobras has also been looking to offload some of its older, less productive fields. Earlier this month the company started the sales process for its 35% stake in Campo de Manati, a gas-producing shallow-water concession in the Camamu basin.

In a statement, Petrobras CEO Roberto Castello Branco noted that the firm's debt had risen only by $2.1bn during the three months, despite the circumstances. Petrobras is pushing ahead with its divestment programme, he said, although there may be some delays. The sale of its eight refineries, representing by far the biggest offering, is still going ahead.

"In particular, we are confident that at least a significant part of the refinery sales shall have purchase-and-sale contracts concluded by the end of 2020," he said.

Petrobras has cut its capital expenditure for 2020 by $3.5bn, according to the CEO.